How are partners taxed?

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Nice try IRS / CRA

likefunny

Heavily.

likesmart

Yes, we are taxed. Instead of witholdings we pay quarterly estimated taxes. But we are taxed big time and in also file in all 50 states!

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(Big 4 partner here)
So the REAL skinny is that we are taxed on the distributions that we receive. At the federal level, we pay just like a regular employee: taxes due on AGI less any credits. Being able to deduct expenses at the K1 level (Schedule P if I remember right) is more advantageous than being an employee because there’s no phase out and it wasn’t impacted by tax reform BUT the firm (and IRS) limits what are “acceptable expenses.” At the state level, we pay where income is SOURCED BY THE FIRM in 42 states (not 50 as someone else stated...not every state has an income tax). We also have to pay in our resident state assuming, of course, that there is a state income tax but most states give at least a partial credit for what you paid in the other states. Hope that helps. #DB

likehelpful

What is current accepted rate for in-kind value of souls sucked? Is taxable?

funny

Yes. Basically we did. And our firms don’t qualify for the lower rate for pass throughs

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On their income. Probs their capital gains as well. In some jurisdictions, on purchases they make

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Pretty sure it’s a feudal system

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Too much

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Early and often

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Like a partnership unlike let's say LLC.

P2 - that’s crazy. Any idea what your effective tax rate looks like?

Don’t most firms have services that do taxes for you though, given the complexity of filing in all states?

Way too much

Wow - so what does your effective tax rate look like? I’d guess close to 35ish%?

^ prob that in just fed. All-in, gotta be much more. 35% fed, avg 5% state, 2% SS b/c of the cap, 2.4% MC, a few points of AMT....

Did all the partners get screwed by the Trump tax cuts then? Since you can’t deduct state tax from federal?

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likefunnysmart

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